MBA 701 Module 7 Questions and
Answers
What is fiscal policy? - answer the means by which a government adjusts its spending
levels and tax rates to monitor and influence a nation's economy.
what is passive fiscal policy? active? - answerpassive: strong econ, no government
intervention
active: government response to ailing economy with the goal of economic growth
what is expansionary fiscal policy? - answermeans an increase in government spending
and a decrease in taxes, which increases the aggregate demand and which shifts the
aggregate demand curve to the right.
response to declining GDP and Inc unemployment
what are the risks of expansion fiscal policy? - answerinflation.
What is monetary policy? - answerThe Fed, FOMC, Central Banks. Policies that control
the supply of money and inflation rate.
what is the quant theory of money? what happens if you Inc M? - answerMV=PQ
Inc M=Inc Q, may also Inc P and lead to inflation
what is the dual mandate? how can it be difficult to maintain? - answermonetary policy.
price stability and maximum employment
some policies that reduce unemployment can result in inflation
what is expansionary monetary policy? - answerincreasing the money supply (M)
What are open market operations? expansion? contraction? - answermonetary policy.
the purchase and sale of U.S. government bonds by the Fed.
expansion: lower fed fund target to dec int rt to Inc individual spending.
contraction: rdc reserves to Inc fed fund tgt to Inc int rt to dec demand
what is the federal funding rate? - answerrt banks charge other banks for
overnight/short-term loans. int rts ctrl inflation
what is the discount rate? - answerthe minimum interest rate set by the Federal
Reserve for lending to other banks.
fed rt usually lower than disc rt so behooves banks to borrow from other banks
Answers
What is fiscal policy? - answer the means by which a government adjusts its spending
levels and tax rates to monitor and influence a nation's economy.
what is passive fiscal policy? active? - answerpassive: strong econ, no government
intervention
active: government response to ailing economy with the goal of economic growth
what is expansionary fiscal policy? - answermeans an increase in government spending
and a decrease in taxes, which increases the aggregate demand and which shifts the
aggregate demand curve to the right.
response to declining GDP and Inc unemployment
what are the risks of expansion fiscal policy? - answerinflation.
What is monetary policy? - answerThe Fed, FOMC, Central Banks. Policies that control
the supply of money and inflation rate.
what is the quant theory of money? what happens if you Inc M? - answerMV=PQ
Inc M=Inc Q, may also Inc P and lead to inflation
what is the dual mandate? how can it be difficult to maintain? - answermonetary policy.
price stability and maximum employment
some policies that reduce unemployment can result in inflation
what is expansionary monetary policy? - answerincreasing the money supply (M)
What are open market operations? expansion? contraction? - answermonetary policy.
the purchase and sale of U.S. government bonds by the Fed.
expansion: lower fed fund target to dec int rt to Inc individual spending.
contraction: rdc reserves to Inc fed fund tgt to Inc int rt to dec demand
what is the federal funding rate? - answerrt banks charge other banks for
overnight/short-term loans. int rts ctrl inflation
what is the discount rate? - answerthe minimum interest rate set by the Federal
Reserve for lending to other banks.
fed rt usually lower than disc rt so behooves banks to borrow from other banks
